Silver price soars on heavy demand, high hopes forhttps://www.usatoday.com/money/markets/2009-11-20-silver20_ST_N.htm
Gold has been getting all the press, but silver is on a streak, too.
Silver has soared to $18.45 an ounce from $10.79at the start of 2009, a 71% gain. In contrast, gold has gained 32%,closing at a record high of $1,141 Thursday.
But silver is nowhere near a record. When goldhit its 2008 high of $1,011.25 an ounce in April of that year, forexample, silver continued to rally to $19.30. And it is nowhere nearthe record high of $49.50 an ounce it hit in 1980, when Nelson andWilliam Hunt unsuccessfully tried to corner the market.
Pushing silver higher now:
•Gold. Gold and silver often move roughlyin tandem, prompted by fears of inflation and the lower value of theU.S. dollar on the currency markets.
•Heavy demand. At $18.45 an ounce, silveris far more affordable than gold. Sales of Silver Eagles from the U.S.Mint have soared to 25 million 1-ounce coins so far in 2009 from 19.6million for all of 2008. Demand has been so high that the U.S. Mint ismaking only 1-ounce silver coins and no proof sets – high-qualitycollector issues.
Another source of demand: silver exchange tradedfunds, which invest directly in silver bullion. The iShares SilverTrust (ticker: SLV) has $5.4 billion in assets and is growing inpopularity as the white metal soars. Several foreign silver funds arealso big bullion buyers.
•Big hopes. People expect silver to playcatch-up, says Jeff Nichols, senior economic adviser for RoslandCapital. It usually takes about 16 ounces of silver to buy 1 ounce ofgold. Now it takes about 62 ounces of silver to buy an ounce of gold."We expect the gold-silver ratio to move toward its historical mean assilver outperforms gold in percentage terms over the next few years,"Nichols says.
Unlike gold, which is used mainly for investmentpurposes, about 50% of all silver goes for industrial uses, accordingto The Silver Institute, a trade group. Although silver is still usedin film photography, it's mainly used in electronics now, says PhilipKlapwijk, CEO of GFMS, a precious metals consulting firm.
Because of the worldwide economic downturn, industrial use of silver has fallen.
Yet demand for silver could pick up.
"Longer term, much of the growth in industrialdemand will come from silver-zinc batteries that will be replacinglithium-ion batteries in electric cars," Nichols says.